The Film Studio/Theater War Has Officially Begun, with AMC Theatres Barring Universal Movies

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The Film Studio/Theater War Has Officially Begun, with AMC Theatres Barring Universal Movies

For years, film industry insiders have wondered what kind of showdown might happen if one of the major film studios/distributors attempted to circumvent the traditional movie theater release format by cutting out the theatrical window entirely. Now, thanks to both the coronavirus and surprisingly successful premium video on demand releases like Trolls World Tour, we’re getting to see the first shots fired of a brand new war. The combatants: The nation’s largest theater chain, AMC Theatres, and one of its largest studios in the form of Universal Pictures.

The gauntlet was laid down this week when NBC Universal CEO Jeff Shell stated that the $95 million bonanza of Trolls World Tour had convinced the company to explore more PVOD releases, even after the ongoing coronavirus pandemic has passed, saying that “as soon as theaters reopen, we expect to release movies on both formats.” This had already drawn the ire of NATO, the National Association of Theatre Owners, who argued that the significant success of Trolls World Tour was an aberration caused by a captive audience rather than a “new normal for Hollywood.”

“This performance is indicative of hundreds of millions of people isolated in their homes seeking entertainment, not a shift in consumer movie viewing preferences,” NATO said in its statement. “It is not surprising that people under shelter-in-home ordinances for weeks on end with increasingly limited entertainment options would take advantage of the movie’s direct-to-VOD move to keep children entertained, even at a premium price.”

AMC, meanwhile, escalated the conflict to the next level by announcing that it would be barring Universal Pictures films from its more than 1,000 theaters, starting immediately. AMC boss Adam Aron took particular umbrage with Universal making its decision without consulting the theaters, and penned a letter in which he lays out AMC’s reasoning in putting up an immediate embargo. Note that he doesn’t object to the release of Trolls World Tour at this time when theaters nationwide are closed, but rather the statement that Universal would continue this practice even after theaters are open and operating once again, circumventing the traditional, exclusive theatrical window. That Aron is upset is hardly surprising, as the theaters depend upon that exclusivity for their very existence.

“Going forward, AMC will not license any Universal movies in any of our 1,000 theatres globally on these terms,” Aron writes in the letter. “Accordingly, we want to be absolutely clear, so that there is no ambiguity of any kind. AMC believes that with this proposed action to go to the home and theatres simultaneously, Universal is breaking the business model and dealings between our two companies. It assumes that we will meekly accept a reshaped view of how studios and exhibitors should interact, with zero concern on Universal’s part as to how its actions affect us. It also presumes that Universal in fact can have its cake and eat it too, that Universal film product can be released to the home and theatres at the same time, without modification to the current economic arrangements between us. It is disappointing to us, but Jeff’s comments as to Universal’s unilateral actions and intentions have left us with no choice.”

Aron goes on to assure the world that this is not a hollow threat, writing the following:

“This policy affects any and all Universal movies per se, goes into effect today and as our theatres reopen, and is not some hollow or ill-considered threat,” he said in the statement. “Incidentally, this policy is not aimed solely at Universal out of pique or to be punitive in any way, it also extends to any movie maker who unilaterally abandons current windowing practices absent good faith negotiations between us, so that they as distributor and we as exhibitor both benefit and neither are hurt from such changes. Currently, with the press comment today, Universal is the only studio contemplating a wholesale change to the status quo. Hence, this immediate communication in response.”

This has the potential to be a massive story on multiple levels, establishing new precedent in several key areas. First of all, as Aron notes, Universal is the only major film studio/distributor that has specifically said they will continue exploring PVOD even after theaters have opened once again. Others such as Disney (Artemis Fowl) and Warner Bros. (Scoob) are planning major PVOD releases during the ongoing quarantine, so AMC’s response to Universal’s announcement may well give them pause on how they state their plans for future PVOD business.

Meanwhile, no other major theater chain has made this kind of unilateral statement against Universal for their announcement. One has to wonder what is going on in the Regal and Cinemark war rooms right now, as the country’s second and third-largest theater chains debate whether they should join AMC Theatres in condemning Universal, or attempt to profit from the fact that their biggest competitor will no longer be carrying Universal films.

Will Universal reconsider, in the face of an AMC boycott? How badly will the loss of Universal films hurt AMC, if the boycott continues after theaters reopen? Who will blink first? It will be fascinating to see the next offensive on this new battlefront.

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